JSH Reporter JSH Reporter - Fall 2017 - Page 14

BAR LIABILITY ARTICLE 014 ASSAULT AND BATTERY ENDORSEMENTS: IS IT REALLY LAST CALL ON BAR LIABILITY COVERAGE? AUTHORS: Michael Hensley & Erica Spurlock EMAILS: mhensley@jshfirm.com; espurlock@jshfirm.com BIOS: jshfirm.com/MichaelEHensley; jshfirm.com/EricaJSpurlock One of the most common risks associated with operating a bar or a restaurant that serves alcohol are claims arising out of fights. Because of this, premiums for insurance that fully covers claims arising out of assault and battery can be quite high. Often times, smaller or newer businesses may opt for cheaper policies as a cost-saving measure, meaning they purchase a commercial general liability policy containing an endorsement outright excluding coverage, or providing only a small dollar sub-limit, for claims arising out of an “assault or battery.” These Assault or Battery Endorsements are generally written so broadly that they even apply to claims alleging negligent hiring, training, and supervision of security staff alleged to have resulted in the injury. On top of all this, Plaintiffs’ attorneys often try to find ways around these endorsements, meaning that one serious injury followed by a creatively-pled complaint could suddenly put the assets of the bar or restaurant at risk. In 2010, the Arizona Court of Appeals examined and upheld such an endorsement as unambiguous, and thus, enforceable on its face. See Tucker v. Scottsdale Indem. Co., No. 1 CA-CV 09-0732, 2010 WL 5313753, at *1 (Ariz. Ct. App. Dec. 21, 2010) (Briefed and argued by co-author Mike Hensley and the JSH appellate team as counsel for Scottsdale Indemnity). Further, the Court of Appeals found that the insured’s reliance on the expertise of her agent to provide adequate insurance was insufficient to overcome summary judgment under the reasonable expectations doctrine. Id. Though Tucker was an unpublished memorandum decision, and thus not authoritative case law, it was one of the first Arizona cases to really examine assault and battery endorsements limiting or excluding coverage. As such, the ruling in Tucker gave insurance carriers a sense of certainty concerning the enforceability of assault and battery endorsements, even when broadly worded, and gave them a seemingly-firm legal basis for coverage denials or limitations based on such endorsements. It appears, however, that the certainty afforded by Tucker may be less certain, and that the decision might not be the “last call” on the enforceability of such endorsements. A RECENT CASE IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA MAY HAVE OPENED THE DOOR TO NEW ATTACKS ON THE VALIDITY OF ASSAULT AND BATTERY ENDORSEMENTS. A recent case in the United States District Court for the District of Arizona may have opened the door to new attacks on the validity of assault and battery endorsements. In Fall v. First Mercury Ins. Co., the District Court agreed with the Tucker court’s conclusion concerning the ambiguity of an assault and battery endorsement, finding that the policy was not ambiguous despite not clearly defining “assault,” “battery,” and “arising out of.” 225 F. Supp. 3d 842, 847 (D. Ariz. 2016). The Court emphasized that as long as an endorsement’s language is clear, courts will be unwilling to create ambiguity to create coverage. The Fall Court also found, however, that under the facts alleged in that case, the insured bar had a reasonable expectation of coverage for a claim stemming from a “physical altercation between a patron and its bouncers who were trying to protect other patrons.” Id. at 848. Under this analysis, evidence pertaining to reasonable expectations – such as prior negotiations, circumstances of the transaction, whether the terms are bizarre and oppressive or eviscerate the non-standard terms of the policy, or if the endorsement applies only in limited circumstances – is sufficient to show a dispute of material fact. The Plaintiffs in Fall presented evidence that the bar manager was a long-term bar owner who